A Focus on Efficiency

Dell company’s founder applies practical approaches to his giving

Michael S. Dell built the multibillion-dollar company that bears his name not by inventing new products or services, but by

constantly looking for ways to sell technology “better, faster, cheaper,” as the company’s mantra goes.

Now Mr. Dell is applying that strategy to his foundation, which ranks among the 50 largest in the nation, by challenging charities to take a hard-nosed look at their operations to find ways to become more efficient and effective.

Mr. Dell and his wife, Susan, are just beginning to emerge as major philanthropic players. They gave $673.8-million to their foundation three years ago, more than doubling its size.

Much of the couple’s giving to date has been to Texas causes, though the foundation has recently expanded its giving to other states, as well as to national and international groups. It is also in the process of fine-tuning its mission, placing a growing emphasis on education and children’s health, as well as exploring new causes to support.

The Michael and Susan Dell Foundation could well become even larger in the coming years, with Mr. Dell’s net worth estimated to be about $18-billion, according to Forbes magazine.

‘A Different Angle’

As the Dells, now in their early 40s, reach retirement age, charity experts say the couple will most likely follow the pattern of other wealthy donors and become increasingly active in their giving.

In addition to the money, some charitable leaders believe that Mr. Dell, who zoomed past competitors in the computer industry by paying attention to things others overlooked, could bring new perspectives to stubborn social problems that affect children.

“The Dells have a certain business approach that translates to the foundation, an efficiency, a way of motivating others to look at things from a different angle,” says MariBen Ramsey, associate director of the Austin Community Foundation. “We’ll all learn a lot in the process, watching them.”

While Mr. Dell’s business sense drives how the fund gives its money away, Mrs. Dell chose the foundation’s initial focus: the development, education, health, and safety of children. “When you become a parent, you are suddenly aware of how important good health and quality education are for the well-being and success of children,” Mrs. Dell said in an e-mail response to questions.

For now, the Dells’ participation in their foundation is limited by the pressures of raising their own children — Kira, 14; Alexa, 12; and twins Zachary and Juliette, 9 — and the demands of their for-profit work. Although Mr. Dell stepped down as chief executive of Dell in 2004, he remains chairman of Dell’s board, while Mrs. Dell is expanding her fashion business, called Phi.

But the couple is in frequent contact with the foundation’s executive director, Janet Mountain, a former Dell company senior executive who, with a staff of 19, looks for ways charities and schools can streamline and improve their work. The foundation also believes in keeping its own expenses trim: The modestly appointed offices are located on the second floor of an Austin strip shopping center.

In its grant making, the foundation seeks out programs it believes are thrifty and effective, especially those that might be overlooked because they seem simple or obvious. That’s in keeping with the approach that succeeded for Mr. Dell in business, according to Pete Winstead, an Austin lawyer who is a longtime friend of the family.

“The whole idea of Dell Direct, cutting out the middleman, was really his genius,” he says. “You say, ‘You know, I could have thought of that.’ But he did it.”

Dell grants have included one to the Austin public-school system to hire counselors as a way to increase the number of high-school students who apply for college.

Since 2002, the Dell foundation has given $4.5-million to finance the program. In the last four years, the percentage of seniors in Austin’s 12 high schools who applied to college rose from 50 percent to 82 percent. The school district says that other factors may have contributed, but that the college counselors made a huge difference. The district gives the counselors credit for increasing other measurements too, such as the number of high-school students taking the SAT’s, the number of parents attending college nights, and the number of students visiting colleges.

The foundation says that not only do students need to be better prepared for college — something the Dells have tackled by paying for intensive tutoring for youths who are falling behind, among other programs — but they also need to understand why college matters.

Teenagers whose parents never went to college, especially poor immigrants, don’t always realize the importance of a college education, Ms. Mountain says. In addition to helping people learn the benefits of a postsecondary degree, the counselors aid with nuts-and-bolts issues, like choosing an appropriate college and filling out a financial-aid form.

“It’s very simple, and it has really practical, dramatic results,” Ms. Mountain says.

Offering Incentives

Another example of the kind of simple remedy to complex problems that the Dells admire is the foundation’s grant to a charity called Shoes for Austin, which helps distribute brand-name athletic shoes to children and families as incentives to meet certain goals, such as completing a math tutoring program. The charity buys sneakers at a discount from major shoe companies and gives them to some 35 charities.

Dianne Bangle, executive director of Shoes for Austin, says the program “really teaches the value of goal-setting, and shows [the recipients] that someone from the outside actually cares about them.”

Experts in childhood development, however, disagree about whether it makes sense to give children tangible rewards for performance. While some approve, others say such programs are tantamount to bribery. Some say that children won’t understand the real benefits of education if their academic achievements are tied to material rewards.

Marvin Marshall, a private consultant and former educator based in Los Alamitos, Calif., who helps teach school districts how to improve students’ behavior and motivate them to learn, has not studied the shoe program. But he says that in general, giving rewards for academic effort produces only temporary improvement. “If the objective is to get kids to want to put forward the effort to learn, this may do it in the short run only. Offer them a shoe, and their motivation is to get the sneaker,” he says.

Mrs. Dell stands by the program. “Every parent knows that motivation can be a positive and exciting experience for a child,” she says.

In all, the Dells have awarded $35-million worth of grants to Texas organizations since 1999 to improve the academic skills of junior-high and high-school students, including $20-million for a new effort to build secondary schools that specialize in math and science. They have also supported education projects in other states, including school-related grants in Chicago and New York.

While the Dells’ grant making has mainly focused on education, they have also awarded money to improve children’s health and well-being. The foundation has made such grants as $25-million for a new children’s hospital in Austin and $500,000 to rebuild the Helping Hand Home for Children, which runs a residential program for youths who have been abused or neglected.

With some grants, the Dells have joined with other foundations. Their foundation has worked closely with the Bill & Melinda Gates Foundation, in Seattle, on several projects, even though gifts from the Gates fund, which is about 30 times the size of the Dell foundation, tend to dwarf the smaller fund’s contributions. Over time, however, the Dells’ grants have become larger in size, more closely matching those of its partner. Mrs. Dell says she and her husband consider the Gates Foundation a mentor for their own, and hope to emulate it as their giving grows.

‘Background Role’

While the Dells have started to step up their giving in recent years, they have done so quietly, preferring to let foundation officials do most of the talking.

In a rare public appearance the couple made in December to receive an award from Caritas of Austin, a local charity, Mrs. Dell delivered a gracious speech about the importance of the charity’s mission. Mr. Dell quietly said, “Thank you,” and sat down.

Some charitable observers say they wish Mr. Dell would do more to publicize his giving, partly because it would set an example for other wealthy Dell executives to give more.

Dell, based in Round Rock, a suburb of Austin, helped create 17,000 millionaires from 1995 to 2000, according to AngelouEconomics, an Austin consulting firm. But relatively few of those millionaires are making substantial charitable gifts in Austin, charities say. A 2003 Chronicle survey found that Austin ranked among the bottom four in the nation’s 50 largest cities in the percentage of discretionary income given to charity.

Friends of the Dells say they probably will continue to avoid the spotlight.

“Michael is a very private person,” says Mort Topfer, a retired Dell executive who runs his own family foundation and often meets with other philanthropists in the region to share ideas. “It’s natural for the Dells to take a background role.”

Nationally the Dell foundation is not much more visible than its founders, despite the size of its wallet. That’s partly because the Dells haven’t created new national efforts to help children. Most of the foundation’s contributions so far have gone to established programs that place an emphasis on measurable results.

Last year, for example, its first round of grants awarded to organizations outside of Texas included $10-million to Teach for America, a charity with headquarters in New York that recruits young adults to serve as teachers in public schools in poor areas. Another $10-million went to New Leaders for New Schools, which recruits and trains principals in Chicago, New York City, and Oakland, Calif., public schools.

Some philanthropic experts hope the Dells will continue to make support of existing groups with strong track records a hallmark of their giving.

“They’re asking, How can we make things better? Where can we build on what others have put in place?” says Curtis W. Meadows Jr., chairman of the board of the RGK Center for Philanthropy and Community Service at the University of Texas at Austin.

That philosophy echoes what Mr. Dell sees as the key to his company’s success. “We didn’t invent the concept of selling directly to customers, we didn’t invent the PC, and we certainly didn’t invent the Internet,” Mr. Dell has said. “But there is always the chance to refine something, to eliminate unnecessary steps, or to look at something in a new light.”

New Causes

Just as the Dells’ engagement with their philanthropy may change over time, the foundation’s giving may change as well. That’s because the couple wants to have the greatest impact possible on children’s lives, Mrs. Dell says.

In line with that goal, the fund began to re-examine its giving priorities last year, says Ms. Mountain. The self-examination isn’t complete, but after interviewing childhood-development experts, as well as other philanthropists, she says the foundation has “come to the conclusion that we want to focus on earlier in a child’s life.”

It has also started to give overseas. In New Delhi, where the foundation is in the process of opening an office, it has provided money for schools and water treatment, and is experimenting with a microfinance program aimed at urban slums. Other microfinance programs have tended to focus on rural areas, the foundation says.

Mr. Dell is familiar with India because Dell has done business there, Ms. Mountain says, but the foundation also saw the country as a place where it could have a big impact given the scope of the needs among children there, as well as India’s growing economy and receptiveness to new ideas. In the future, the foundation may expand its grant making to other parts of the region.

The foundation also added a new grant-making program in the wake of the 2004 tsunamis in South Asia: disaster-relief grants to help meet children’s needs. It donated $3-million to charities in Sri Lanka and Indonesia and to international relief groups. Last year it gave $5-million to help victims of the Gulf Coast storms.

No matter what direction the Dells’ giving takes, they hope it will continue beyond their lifetimes.

“Michael and I both hope our family foundation will be part of our legacy and carried on through our family for many generations,” Mrs. Dell says.

The Dells’ children are already learning about charity. Judy Carter, executive director at the Capital Area Food Bank of Texas, in Austin, remembers being contacted by the foundation a few years ago about a program called Kids Cafe, which provides dinner for poor children. In Austin, the cafes are set up in public schools. Children who participate in tutoring or other programs at the schools receive a hot meal in the early evening.

The Dells wanted to pay for a cafe in a public school that did not yet have one. The Austin food bank sent the names of four schools that lacked such a program.

“They came back and said the Dell kids wanted to know what would happen if they fund just one school — would there be kids in the other three who wouldn’t get dinner?” Ms. Carter says. Probably, she replied.

“So they said, we’ll fund all four.”